PLEASE ANSWER ALL THE QUESTIONS I ASK PLEASE 8) If there is constant returns to
ID: 1225202 • Letter: P
Question
PLEASE ANSWER ALL THE QUESTIONS I ASK PLEASE
8) If there is constant returns to scale in a competitive industry, then:
A) The long-run supply curve will be horizontal. B) An increase in demand will raise the average total cost of producing the good. C) The long-run supply curve will be downward sloping. D) Then an increase in demand will lower the price in the short run but raise it in the long run. E) Then an increase in demand will raise the price in the short run as well as raise the price in the long run.
9) Which of the following statements regarding the above diagram is TRUE?
A) If the price is $8 per bushel of wheat, then the typical wheat farmer will earn zero economic profits. B) If the price is $10 per bushel of wheat, then firms will exit the wheat industry causing the price of wheat to fall in the long run. C) If the price is $12 per bushel of wheat, then the typical wheat farmer will produce 100,000 bushels of wheatof wheat to increase. D) If the price of wheat falls from $8 to $6 per bushel of wheat, then the profit maximizing output for the typical wheat farmer will fall from 110,000 bushels to 100,000 bushels of wheat. E) If the price is $6 per bushel of wheat, then the typical wheat farmer will exit the industry causing the supply.
10) If price is equal to minimum average total costs, then:
A) Firms will begin to shut down immediately. B) Firms will earn excess profits in the short run and in the long run there will be entry into the industry. C) Economic profits will be less than zero but firms will not exit because they earn normal profits. D) Economic profits will be zero but firms will remain in the industry because they earn normal profits. E) Economic profits are less than zero but firms are paying some of their fixed costs so they will continue to produce in the short term and exit in the long term when their fixed obligations have expired.
11) Assume that the market for CDs is competitive and the typical CD producer breaks even when the price of CD is $10. Which of the following statements concerning the CD market depicted in the diagram above is TRUE?
A) The increase in demand for CDs will raise the price of CDs in the short run, but the higher price will reduce demand in the long run and cause the price of CDs to fall. B) If the CD industry is a decreasing cost industry, then the increase in demand shown above will lower the price of CDS below $10 per CD in the long run. C) If the CD industry is an increasing cost industry, then the increase in demand shown above will raise the price of CDs in the short run but lower the price in the long run. D) The increase in demand for CDs will raise the profits of CD producers in the short run, but reduce economic profits below zero in the long run. E) If the CD industry has increasing returns to scale, then the increase in demand shown above will raise the price of CDs in the short run but return the price to $10 in the long run.
12) The shut down point is when:
A) A firm can no longer pay its debts. B) A firm can only earn normal profits. C) Price is below minimum average total costs. D) Price is equal to minimum average variable costs. E) Output falls below minimum marginal costs.
13) A monopolist can increase their profits by bundling their products because bundling allows them:
A) To price discriminate and charge consumers higher prices based on their willingness to pay. B) Create different varieties of their product at different price and quality levels. C) Create different varieties of their product at the same price and quality level. D) Create both different varieties of the product at different price and quality levels and at the same price and quality level. E) To force consumers to pay for products they have little use for to obtain something that has great value to them.
14) Schumpeter argued that monopolists eventually fall because:
A) Entrepreneurs find away to innovate around the monopolist's control over their market. B) Eventually an entrepreneur finds a way to compete directly with the monopolist. C) Consumers tire of the monopolist's product and they stop purchasing it. D) The government outlaws the monopoly. E) Consumers band together to counter the monopolist's control over the product.
15) A monopolist's price is:
A) Equal to their minimum average total cost in the long run. B) Equal to their marginal cost. C) Below their minimum average total cost in the long run. D) Above their marginal cost. E) Equal to their minimum average variable cost in the long run.
16) An example of price discrimination is when: A) A law firm provides better service to their wealthy clients. B) An airline charges fees for baggage. C) A country doctor charges his patients different prices for checkups based on their income. D) A software maker bundles their programs together rather then sell them separately. E) A car maker creates a new variety of their product at a higher price and quality level.
17) A monopolist never drops their price to the point where: A) They can only earn normal profits. B) It is below minimum average total costs. C) They earn almost no excess profits. D) Demand is elastic and marginal revenue is above zero. E) Demand is inelastic and marginal revenue becomes negative. 18) A monopolist can earn excess profits in the long run because: A) They can keep their price above their marginal cost. B) There are good substitutes for the product they produce. C) They can restrict output to raise their price. D) They have barriers to entry that prevent competition. E) They have the power to set their price. •
Explanation / Answer
12. D) Price is equal to minimum average variable costs.
When P = AVC then firm shut down its production because firm is able to just cover its variable cost.
13. E) To force consumers to pay for products they have little use for to obtain something that has great value to them.
14. A) Entrepreneurs find away to innovate around the monopolist's control over their market.
15. D) Above their marginal cost.
Monopolist price is that where intersection of MR and MC of firm intersects the demand curve. So, price is greater than the MC.
16. C) A country doctor charges his patients different prices for checkups based on their income.
Price discrimination is a practice of charging different prices from different customers for the same product or service.
18. D) They have barriers to entry that prevent competition.
Monopolist are able to earn profit in the long run because of barriers on the entry of other firms in the industry.
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